Australian grocery retailing market led by Woolworths with a 34% value share

The Australian grocery retailing market grew by 3% in current value terms over 2012, to generate revenues of A$111.6 billion.

Growth in 2012 was similar to the performance of the past four years which saw a compound annual growth rate (CAGR) of 5% in current value terms. In an environment of continued low consumer confidence, grocery retailers competed fiercely for consumers' spending.

According to a recent report, 'Grocery Retailers in Australia,' the category is dominated by supermarkets, which accounted for 65% of grocery retailers' sales in 2012. Supermarkets' dominance of the grocery retail channel in Australia is supported by their economies of scale.

In 2012, the leadership in grocery retailing was held by Woolworths Ltd, with a 34% value share. The diversified retailer operates in supermarket retailing, chained forecourt retailing and liquor stores. Following close behind in 2012 was Wesfarmers, with its Coles fascia, with its value share reaching 29%.

Supermarkets are able to offer low unit prices with a vast store network at convenient locations for consumers to shop close to work or home. Supermarkets have looked to offer a one-stop-shop for consumers, developing and broadening their product offerings.

The leading supermarket fascias, Woolworths and Coles, fought an intense price war in 2012. The two leading supermarket players promoted "Everyday Low Pricing" to win cost conscious consumers and stave off the growing threat from the discounter Aldi and warehouse club Costco.

The price war began with private label milk being sold at A$1 per litre from January 2011, a strategic loss leading initiative that is still in place, and continued into other offerings, such as olive oil, toilet paper and bread.

The discounter channel continued to be the key attraction for increasingly value-conscious consumers through its fixed, low-pricing structure. The discounter channel recorded the most robust growth in grocery retailing in 2011, of 13% in current value terms, although growth slowed to 4% in 2012.

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